Senate Approves Central American Free Trade Agreement

The US Senate on June 30 approved the Dominican Republic-Central American Free Trade Agreement
(DR-CAFTA), setting the stage for a major battle in the House of Representatives when Congress
returns from its July 4 recess. The 54-45 vote showed considerable support for the agreement among
Southern textile state senators, with Sen. Lindsey Graham (R-SC) being the only senator to vote
against the measure. In the New York-New England area, where both textiles and apparel are major
employers, the vote was just the opposite with the New York, Massachusetts and Rhode Island
senators opposing the measure, except for Sen. Lincoln Chafee (R-RI), who voted for it.

Concurrent with the Senate action, the House Ways and Means Committee voted 25-16 to send the
measure to the full House for a vote soon after the recess.

Both supporters and opponents of the pact, which will lower or eliminate trade barriers to
imports to the United States from Honduras, Nicaragua, Costa Rica, Guatemala, El Salvador and the
Dominican Republic, said the Senate vote showed momentum for their positions. The textile-related
American Manufacturing Trade Action Coalition said DR-CAFTA is losing momentum and is in serious
trouble. A statement noted that the 54-52 vote was the closest vote on any of the recently
negotiated free trade agreements, including the North American Free Trade Agreement, which DR-CAFTA
is modeled after, that passed the Senate by 61-38.

On the other hand, Kevin Burke, president of the American Apparel and Footwear Association,
which supports DR-CAFTA, said the House and Senate votes show clearly that there is growing
momentum toward full passage and implementation of this very import agreement. Noting the support
from textile state senators, Burke said there is strong recognition that this agreement is vitally
important to the US textile and apparel industry and its Dominican Republic and Central American

The National Council of Textile Organizations, which also supports DR-CAFTA, said the textile
region votes were the strongest show of support of any region.

US Trade Representative Rob Portman said momentum is on the side of the administration.
“Every day we’re making more and more progress. The House Ways and Means Committee gave DR-CAFTA a
good shot in the arm by approving the implementing legislation 25-16,” Portman said. “While the
momentum for DR-CAFTA is building, and we’re drawing more and more support from all sides, the
debate will continue when the House returns after the July 4 recess. I look forward to working to
build towards successful passage in July.”

While there is pretty general agreement that the pact will not open many opportunities for US
exports to the Central American countries because of their size and poor economies, DR-CAFTA has
become a linchpin in the Bush administrations trade policies as the president believes free trade
agreements can be mutually beneficial by providing economic stability in some of the less-developed
countries. At the present time, imports from the DR-CAFTA countries account for about 6 percent of
total US imports of textiles and apparel.

July 2005